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Industry bargaining for living wages

18 August, 2015As pressure is increasing on multinational corporations (MNCs) to account for violations of workers’ rights in their global supply chains, trade unions are identifying how MNCs’ own sourcing practices lead to these violations and developing new models of cooperation to change them. IndustriALL is working with major clothing brands in a process known as ACT to create a system that can increase wages in a sustainable and enforceable way.

In garment industry supply chains, exploitative working conditions are standard. Workers are forced to work long hours, often far beyond legal boundaries, for poverty wages and in poor conditions.

Decades of public campaigning and recurrent fires and building collapses occasioning multiple deaths have given a high level of visibility to labour conditions in garment supply chains. But responses by those companies at the top of the chain have not been able to bring about the fundamental change necessary.

Building new models of cooperation

Corporate social responsibility (CSR) programs rely on auditing and compliance to attempt to improve conditions in the factories, which produce for them. These unilateral, voluntary and nonbinding efforts have overwhelmingly failed to improve wages and working hours or to ensure respect for workers’ right to join a union. Notoriously, social auditing and certification bodies SAI and BSCI gave clean bills of health, respectively, to Ali Enterprises before it burnt down killing 254 workers and Rana Plaza before it collapsed, killing 1129 workers.

IndustriALL policy director Jenny Holdcroft says:

“Violations of the rights of garment workers, low pay and excessive working hours are a global problem to which there needs to be a global response. We need a fundamental change to the way that production is organized in garment supply chains to provide relief to workers from poverty wages and crippling working hours.”

Such a fundamental change may be the legacy of the Rana Plaza collapse. The Bangladesh Accord on Fire and Building Safety is a legally-binding agreement between global unions and more than 200 clothing companies.

Through the Accord experience, unions and companies have identified the elements that must be present in order for strategies to improve supply chain labour standards to be effective:

  • Efforts must be collaborative, and involve buyers, factories, workers and their unions
  • They must address root causes, including purchasing practices
  • They must include longer-term commitments from buyers to suppliers in order to provide an incentive for them to comply, as well as sanctions if they do not.

These experiences have made it possible for garment companies and IndustriALL Global Union to join forces to apply such an approach to living wages in the garment industry, in a process known as ACT.

Identifying the root causes

Garment workers are currently under-represented by trade unions which face massive barriers to organizing from both employers and governments. Over 90 per cent of workers in the global garment industry have no possibility to negotiate on their wages and conditions and so are not able to claim their fair share of the value that they generate.

Garment sector wages in Bangladesh are currently $68 a month, but unions say that these need to increase to at least $120 for workers to be able to support themselves and their families adequately. In Cambodia, the minimum wage has risen to $128, but this is still well below union demands for a living wage.

The absence of industry wage bargaining in the garment industry has left workers reliant on ineffective minimum wage mechanisms for any wage increases. While minimum wage fixing at least establishes a common floor, the wages that result are well below the level of a living wage in most major garment producing countries like Cambodia and Bangladesh.

Particularly in supply chain industries, bargaining at the level of individual factories will never be enough to drive up pay and conditions when MNCs can simply move to suppliers with lower standards and lower labour costs. Efforts by individual MNCs to raise standards meet with opposition in their supplier factories, which have to compete with other factories on labour costs. Even if buyers increase the prices they pay, without collective bargaining in place there is no guarantee that the increases will be passed on to workers. Furthermore, most suppliers have multiple buyers, all of whom negotiate prices with them individually.

Industry bargaining is key

Industry bargaining enables the particular features of the textile and garment industry to be taken into account in wage structures in a way that minimum wage fixing processes are unable to do. It enables comprehensive agreements to be reached that take into account all relevant issues including wages, overtime, working hours, production peaks and productivity and efficiency.

Jenny Holdcroft says that collective bargaining at industry level is the missing mechanism that will enable significant progress to be made towards living wages for garment workers:

“Industry-wide agreements make it very difficult for employers to escape their obligations. They effectively take labour costs out of competition by creating a level playing field that enables conditions to improve for all workers in an industry.

“The incentive then is to compete on the basis of efficiency and quality rather than by undermining wages and working conditions. Factories have a collective interest in ensuring that they are not undercut by unscrupulous employers paying wages lower than the prevailing rate.”

By covering all workers in an industry, industry agreements ensure the inclusion of the most vulnerable workers including the many precarious workers, migrant workers, contract workers and home workers found in the garment industry.

MoU on living wages in the garment industry

IndustriALL has signed a Memorandum of Understanding with each of the brands involved in the ACT process. The MoU is explicit in identifying the development of industry bargaining in garment producing countries as essential to achieving living wages and the need for effective recognition of workers’ rights to freedom of association and collective bargaining in order for this to be realized.

The ACT process will develop the means to link the supply chain responsibilities of buying companies to the collective bargaining process between local unions and employers. This will involve developing contractual or other mechanisms that support suppliers to implement the negotiated wage. Commitments to continued sourcing and greater stability of orders will be key, as will commitments that prices paid will take account of negotiated increases.

By linking national industry-level collective bargaining between unions and employers to the purchasing practices of brands, the ACT process creates a framework for genuine supply chain industrial relations. Through industry bargaining, wages can be negotiated at a level that enables workers to properly support themselves and their families while addressing the specific nature of the industry, working hours, productivity and other issues that have bearing on wages.

To ensure that the agreed rate is actually paid, the resulting agreements need to be registered and legally enforceable under national laws. Factories also have to have the means to pay the agreed rate and this is achieved through reforming purchasing practices. All three elements must be present to create a system that will actually deliver on living wages.

The ACT process aims to transform the way that wages are set, by establishing industry agreements supported by brand purchasing practices as the primary means of wage fixing in the global garment industry. This is an ambitious aim, which will require significant political will, particularly in those countries that supply cheap labour to global supply chains.

The way forward

For the first time, the ACT process has established the commitment of IndustriALL and major clothing brands to working together to create a system that addresses the structural barriers to living wages. The outcome will be to increase garment workers’ wages in a way that is scalable, sustainable and enforceable.

Drawing on these experiences, and those of the Bangladesh Accord, there is no reason why similar models cannot be developed that institutionalize relationships between buyers, factories and workers to address other labour rights problems that are entrenched in the very way that supply chains are managed.

There is now an opportunity to remodel the industrial relations architecture to address the realities of employment relationships and working conditions in today’s global supply chains, towards genuine supply chain industrial relations.

Click here to read the full paper which will appear in the International Journal of Labour Relations in December 2015.